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Friday, January 21, 2011

Preparing to deliver his first State of the State address last week, Gov. Chris Christie of New Jersey was looking at a $10.5 billion budget gap, a collapsing pension fund and a probable cut in Medicaid spending. He was also being asked to put money aside for Hollywood.

Government subsidies for film and television productions proliferated in flush times as more than 40 states competed for entertainment work. Those subsidies face an uncertain future as new governors and lawmakers, many of them fiscal conservatives, join incumbents like Mr. Christie in trying to balance budgets without losing jobs.

Tax credits for Hollywood were recently expanded in Florida and North Carolina but are under fresh scrutiny in states like Pennsylvania, Michigan and New Mexico, all of which have new Republican governors reviewing film subsidy programs that were begun under Democratic predecessors.

No big spender has yet pulled out of the subsidy business, though Arizona, Iowa and Kansas have suspended or dropped their relatively small programs. In Missouri, meanwhile, a bipartisan review of all the state’s tax credits recommended that a film incentive be dropped, but no bill has been introduced to do so.

That has been enough to send a shudder through Hollywood, where producers have come to rely on taxpayer support for films like "How Do You Know","The Social Network", "Love and Other Drugs","127 Hours" and many others.

"If you take that away, I think production will leave the U.S.", a producer, Brian Oliver, said. He is about to leave for Michigan and Ohio to begin shooting "The Ides of March," a drama directed by and starring George Clooney that follows political campaign operatives on the road to the White House. Mr. Oliver said his Cross Creek Pictures, one of the companies behind "Black Swan", could not function without public money.

Countries like New Zealand, which is helping to underwrite a $500 million production of two films based on J. R. R. Tolkien’s "The Hobbit", from Metro-Goldwyn-Mayer and Warner Brothers’ New Line Cinema unit, may well pick up more production from the United States if the states cut support.

In a ferocious debate over the efficacy of film incentives — advocates say they create employment, while critics say they are inefficient and merely shuffle jobs around — New Jersey has been on the front line.

Both houses of the Democrat-controlled Legislature passed a bill on Jan. 10 reviving and expanding a tax credit that underwrites up to 20 percent of certain expenses of a film. Last year, Mr. Christie suspended the program in the fiscal crisis.

"It was one of the first things to go, and it wasn’t that difficult a call", Michael Drewniak, a spokesman for Mr. Christie, said of the governor’s decision to halt the credit as he confronted a ballooning deficit.

Mr. Drewniak declined to say whether Mr. Christie was inclined to sign off on the reinstated credit, though he said one factor in the decision was an expected review of the program’s effectiveness.

Studies about the efficacy of film credits, which became widespread in the last eight years, have been maddeningly divergent in their conclusions, depending on methodology, the structure of the credit and, sometimes, who sponsors the report.

Looking at the credits nationwide, a report released in December by the nonprofit Center on Budget and Policy Priorities pointed to a study done for the Massachusetts Legislature in 2009 that concluded film subsidies were costing the state $88,000 a job. A similar study for New York’s film office said government coffers were gaining $2,000 with each job created.

Over all, the center’s report concluded that film subsidies offered "little bang for the buck". The Motion Picture Association of America, which represents the major film studios, shot back with a critique of what it called a "slipshod" report by the group, which it said was biased against government incentives.

Bob Pisano, the association’s president, pointed out in an e-mail last week that film incentives might remain attractive even for states with budget problems, because, in effect, they pushed costs down the road. The credits create jobs and business and tax revenue quickly, but generally require "no cash payment on the credit until productions are completed and audited up to two years later", Mr. Pisano wrote.

But even advocates for the credits — which often give a film company direct or indirect cash payments even if no tax is owed — acknowledge that the itinerant nature of film work makes it difficult to hold on to movie jobs. This fact has often left states bidding against each other for films and television shows.

"The industry is so mobile, it can go anywhere", said Joseph Chianese, a senior vice president with Entertainment Partners, which advises the film business on credits and other matters.

It is only natural, Mr. Chianese said, that a new group of governors and legislators should be reassessing the incentive programs, though he cautioned against assuming that even the most pressed state would be quick to abandon support for highly visible glamour jobs.

Gov. Susana Martinez of New Mexico has proposed cutting her state’s film credit.

“If you retract these incentives, a lot of new facilities will be sitting empty,” Mr. Chianese said. In New Mexico, the newly elected Republican governor, Susana Martinez, may be willing to take that risk. Ms. Martinez, facing a budget gap of $400 million or more, hopes to save $25 million in the 2012 fiscal year by proposing that the Legislature cut the state’s film credit to 15 percent from 25 percent. That would happen even as the state’s four-year-old Albuquerque Studios, whose parent company filed for bankruptcy protection last year, has been counting on help from heavily subsidized productions like “The Avengers,” a film planned by the Walt Disney Company and its Marvel Studios unit.

In Michigan, where one of the country’s most generous subsidies can cover about 40 percent of the spending on productions like “The Ides of March,” reporting requirements for film companies have already been tightened. Now, Republican legislative majorities will join a newly elected governor, Rick Snyder, in deciding whether to scale back the credit, which may cost the state an estimated $150 million in its 2012 fiscal year, while addressing a $1.85 billion budget gap.

In Pennsylvania, Gov. Tom Corbett has been pressed by some to consider reducing or eliminating the state’s film credit, which helped support films like “Unstoppable” and “The Next Three Days,” as part of an effort to close a $5 billion budget gap. Shortly after the November election, Senator John Pippy, who is chairman of the legislative and budget committee in the state senate, told The Pittsburgh Tribune-Review that any surviving credit would require “significant justification.”

And then there is California, where Jerry Brown, the newly elected Democratic governor, is confronting a $25 billion budget gap. Mr. Brown is proposing to cut social services and state employee pay while extending tax increases that were supposed to be temporary.

He has also provoked howls of protest by insisting that state workers return 48,000 cellphones by June 1 in a bid to save $20 million.

But film and television tax credits passed under his predecessor, Arnold Schwarzenegger, remain intact at a cost of $100 million a year.

Amy Lemisch, the director of the California Film Commission, cited a report last week on the Film L.A. Web site that showed an uptick in film production in the Los Angeles area after years of decline. She attributed film crew wages of $697 million to California’s credit since it began in the 2009 fiscal year.